March 20, 2017 – Folio

The association calls on the Postal Regulatory Commission to “protect captive users of the Postal Service” by maintaining its inflation-based rate cap.

As the Postal Regulatory Commission’s 10-year review of USPS postage rates moves forward, the MPA has teamed up with a pair of mailer organizations to argue the case for affordable shipping.

The PRC, an independent agency appointed to monitor and set postage rates for the USPS, is currently undergoing a congressionally-mandated review to determine whether the current pricing system meets a number of objectives, among them: maintaining the Postal Service’s financial stability by ensuring adequate revenues, maximizing incentives for the Postal Service to reduce costs and increase efficiency, and to “maintain a just and reasonable schedule” for raising rates moving forward.

Essentially, the Postal Service wants the PRC to recognize that those objectives have not been met, and the current inflation-based price caps on postage rates must be lifted. Led by Postmaster General Megan Brennan, the USPS argues that its economic situation remains bleak, primarily due to an onerous obligation to pre-fund employee retirement benefits and the lifting of the exigency surcharge — a 4.3 percent premium added to all classes of mail from January 2014 until its expiration, last April, which led to the first reduction in postal rates since World War I.

The MPA, along with the Alliance of Nonprofit Mailers (ANM) and the Association for Postal Commerce (PostCom), disagrees with that assessment, submitting comments to the PRC this week calling on it to “retain the inflation-capped pricing structure that has protected captive users of the Postal Service’s monopoly services for the past decade.”

“On the one hand, USPS assiduously guards the mail and mailbox monopolies that federal law guarantees, protecting it from the competitive market forces that private industry has had to withstand,” said Linda Thomas Brooks, MPA president and CEO, in a statement. “But at the same time, USPS seeks unfettered pricing freedom, with only minimal regulatory oversight.”

The three associations’ common stance is that declines in postal volume have actually stabilized in recent years, following steep drop-offs from 2007 to 2010, and that operating revenue is increasing, contrary to the Postal Service’s portrayal of the situation.

“The Postal Service wants to raise rates faster than inflation because it says its finances are upside down,” added ANM president Stephen Kearney, who spent 33 years with the USPS in various executive roles, including treasurer. “But our expert analysis shows that USPS is actually in good shape and in fact has made an operating profit in each of its last three fiscal years.”

In November, the USPS reported a tenth-straight annual net loss, saying it ended FY 2016 $5.6 billion in the red. The USPS blamed the continued losses on the “unaffordable” retiree health benefits program, while noting that operating revenue actually increased 3.8 percent in the same period. Still, that health benefit pre-funding obligation accounted for just $5.6 billion of the agency’s $77.1 billion in overall expenses for the year.

Included in the comments submitted to the PRC by the three associations are some suggested means by which the USPS might improve its financial situation, ranging from specific to over-arching. Among them: reducing compensation for employees, which the associations argue are overpaid compared to their counterparts in the private sector; placing renewed emphasis on driving productivity; conceiving new sources of revenue, like advertising on mail trucks; and, simply, making better decisions when it comes to management and pricing.

Regardless of how the conflict unfolds, don’t expect a resolution to arrive quickly. In January, the MPA filed a request — backed by several other organizations, as well as UPS — to delay the March 20 deadline for submitting comments on the upcoming rulemaking until after the PRC had conducted its review. That request was denied, but the PRC still isn’t expected to reveal its findings — or any recommended rule changes — until “early Autumn.”